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Strategies & Market Trends : The Art of Investing -- Ignore unavailable to you. Want to Upgrade?

To: S. maltophilia who wrote (8269)	3/17/2024 11:44:22 PM
From: Sun Tzu	Read Replies (1) \| Respond to of 10522

Why would you say this? I would venture to say that some of those Cornell students couldn't afford to enroll in the next semester M-Score is not a market timing thing. And if you read the logic of the score and how it works, you'll see that it is likely that the stock will move much higher before it collapses. This is because one of the core elements of the model is to catch high flying stocks that have gotten way ahead of themselves and now are facing a slowdown. Because the stock is so hot, any hint of a slowdown will crash it. And that brings with it a substantial incentive to manipulate the earnings. No salesman or exec wants to come to work and get the blame for being the one who upset the apple cart and cost his colleagues their kids' college fund or down payment on a major purchase. So they will all play the accounting game and pray that next quarter will be better and they can ride it out. In the extreme - and this is a real case - a company ended up shipping equipment that the client had not ordered. This allowed them to book sales during that quarter. Of course the client would return the goods and they'd have to write it down. But that was a problem for the next quarter and the hope was that some other customer would materialize for that order. But when that didn't happen, guess what they did? They shipped twice as many unordered goods - one set to make up for the returned batch, and another set to keep the growth narrative going. And they kept shipping larger and larger number of unwanted merch every quarter. That stock was sure going up hot. And it kept going up on the back of fake orders for more than a year. But eventually the truth comes out and it hits the fan. BTW, the company was a Dow component too (if I remember it correctly). So this kind of thing is not limited to low quality stocks. Is NVDA or SMIC doing this? I have no idea. But I do know that saying their growth rate is slowing, let alone missing their numbers will have dire consequences for the company. And that sure incentivizes the execs to take advantage of whatever accounting rules they can.